'Prima Facie Discloses Fund Siphoning': Rajasthan High Court Refuses To Quash Cheating FIR Against Filmmaker Vikram Bhatt, Others

The Rajasthan High Court rejected pleas filed by filmmaker Vikram Bhatt and other persons seeking quashing of a cheating FIR lodged against them, observing that the FIR at this stage "prima facie" disclosed allegations of siphoning, diverting and misappropriation of funds which cannot be treated as "mere breach of contract". The matter related to a FIR being filed against the petitioners–Bhatt and other persons, in relation to a contract signed between them and the respondent-complainant for making four films for which a consideration of Rs. 42 Crores was paid to the petitioners. Justice Sameer Jain observed that at this stage, the court cannot conclusively determine whether the dispute is purely one of breach of contract or constitutes the offence of criminal breach of trust. The court said:“Prima facie, the material emerging from the enquiry conducted by the State, as well as the allegations levelled by the complainant, disclose sufficient grounds warranting investigation.…merely because a transaction has a contractual foundation does not ipso facto bar criminal proceedings, where the allegations disclose ingredients of cognizable offences. The material on record indicates that the prosecution case is not confined to non-performance of contractual obligations, but extends to allegations of deliberate diversion of funds, lack of transparency, and dishonest utilisation of monies entrusted for film production.”The court further said:"...the FIR, read as a whole, along with the material collected during the preliminary enquiry, prima facie discloses allegations of siphoning of enormous amount upto the tune of Rs. 2.5 Crore qua the total amount in question being 47 Crore approximately, diversion and misappropriation of entrusted funds, involving dishonest intent, use of intermediary accounts and inflated or fictitious invoices, which cannot be reduced to a mere breach of contract at this stage. It is note-worthy that it prima facie appears that the petitioners have approached the Court with unclean hands, nonetheless, concealing material facts, for instance, the anticipatory/transit bail application so moved; that the record shows that upon receipt of the parivad on 28.10.2025, a preliminary enquiry was conducted by the Investigating Officer, including examination of documents and electronic material, and only thereafter was the FIR registered; that notices issued to the petitioners on 23.11.2025 and 29.11.2025 elicited prima facie unsatisfactory replies, thereby negating any violation of the mandate of Arnesh Kumar (supra) or due process....".The court said that the material further reflected "allegations of diversion of funds from the inception of the transaction, creation of data with accelerated charges, execution of an additional agreement shifting jurisdiction from Mumbai to Udaipur, and references to past antecedents and insolvency-related proceedings indicating financial distress of the petitioners' firm" which forms part of the investigative record and cannot be ignored at this stage. "In view of the foregoing discussion, this Court is of the considered opinion that the impugned FIR discloses prima facie commission of cognizable offences and warrants a full-fledged investigation. No ground is made out for invocation of the inherent powers of this Court under Section 528 of BNSS," the court added. The FIR alleged that there were exaggerated expenses being carried out by the petitioners, and hence, the offence of breach of trust and cheating was committed. The petition was filed before the Court seeking quashing. It was argued on behalf of the petitioners that the FIR emanated from a purely contractual relationship, and an attempt was made to give it a criminal colour. It was further argued that the agreements between the parties were acted upon publicly, and there were no allegations or evidence to suggest existence of fraudulent or dishonest intention of the petitioners from the inception. Hence, at most, the ingredients of criminal breach of trust were not fulfilled.On the contrary, it was argued on behalf of the State that the petitions were based on misrepresentation and suppression of material facts including siphoning off of funds, rejection of anticipatory bail applications by the Maharashtra High Court, pendency of multiple litigations and insolvency proceedings, etc. It was argued that the funds allocated for different films were diverted and the films actually never commenced. The investigation revealed a modus operandi involving inflated and fictitious invoices. Further, it was submitted that there were instances of tampering with the witnesses and evidence, and therefore, arrest of the petitioners became inevitable. After hearing the contentions and perusing the records, the Court held that no case was made out for quashing of FIR since the allegations in the FIR, coupled with the material collected during preliminary enquiry revealed allegations of dishonest...

'Prima Facie Discloses Fund Siphoning': Rajasthan High Court Refuses To Quash Cheating FIR Against Filmmaker Vikram Bhatt, Others

Nupur Aggarwal

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'Prima Facie Discloses Fund Siphoning': Rajasthan High Court Refuses To Quash Cheating FIR Against Filmmaker Vikram Bhatt, Others

Nupur Aggarwal

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